September 29, 2006 Leave a comment
Murray Rothbard was always so gentle in his disagreement with his mentor, Ludwig von Mises.
- They disagreed on natural rights;
- they disagreed on the necessity of the State; and
- they disagreed on foreign policy (based, I suspect, on disagreements #1 and #2)
Mises’s [turn-of-the-century] article on the gold standard proved highly controversial. He called for a de jure return in Austria-Hungary to gold redemption as a logical conclusion of the existing de facto policy of redeemability. In addition to running up against advocates of inflation, lower interest rates, and lower exchange rates, Mises was surprised to face ferocious opposition by the central bank, the Austro-Hungarian Bank. In fact, the Bank’s Vice-President hinted at a bribe to soften Mises’s position. A few years later, Mises was informed by Bohm-Bawerk, then Minister of Finance, of the reason for the vehemence of the Bank’s opposition to his proposal for a legal gold standard. Legal redemption in gold would probably deprive the Bank of the right to invest funds in foreign currencies. But the Bank had long used proceeds from these investments to amass a secret and illegal slush fund, from which to pay subventions to its own officials, as well as to influential journalists and politicians. The Bank was keen on retaining the slush fund, and so it was fitting that Mises’s most militant opponent was the publisher of an economic periodical who was himself a recipient of Bank subsidies.
Mises came to a decision, which he pursued for the rest of his career in Austria, not to reveal such corruption on the part of his enemies, and to confine himself to rebutting fallacious doctrine without revealing their sources. But in taking this noble and self-abnegating position, by acting as if his opponents were all worthy men and objective scholars, it might be argued that Mises was legitimating them and granting them far higher stature in the public debate than they deserved. Perhaps, if the public had been informed of the corruption that almost always accompanies government intervention, the activities of the statists and inflationists might have been desanctified, and Mises’s heroic and lifelong struggle against statism might have been more successful. In short, perhaps a one-two punch was needed: refuting the economic fallacies of Mises’s statist enemies, and also showing the public their self-interested stake in government privilege.
That’s from Ludwig von Mises: Scholar, Creator, Hero, which we’re running as the weekend edition to celebrate the 125th anniversary of Mises’s birth.
What appears at first to be either a difference in personal style or a minor difference of opinion on strategy is in fact a critical difference in understanding
- how the academic profession works;
- how the political class works; and
- how history works.
The Viennese Austrians had a very different view of truth and progress than did the scrappy New Yorker who would carry the Austrian School into the second half of the 20th century (and into the 21st century, thanks to the institute he helped found). Rothbard’s most significant strategic insight, the one behind the founding first of the Cato Institute and later the Mises Institute, is that the truth has to be fought for tooth and nail. The progress of ideas does not advance by the linear Whig Theory of History or even the zigzag advancement of Hegelian dialectic. True to the insights of philosophical and methodological individualism, Rothbard saw that human beings are perfectly capable of screwing things up through bad thinking and bad decisions. There is no guarantee that the truth will out, certainly not in the short run.
Unlike their successful enemies, such as Schmoller and Lujo Brentano, and even Wieser, neither Menger nor Bohm-Bawerk saw the academic arena as a political battlefield to be conquered. Hence, in contrast to their opponents, they refused to promote their own disciples or followers, or to block the appointment of their enemies. In fact, Bohm-Bawerk leaned even further backward to urge the appointments of sworn enemies of himself and of the Austrian School. This curious form of self-abnegation helped to torpedo Mises’s or any similar academic appointment. Menger and Bohm apparently insisted on the naive view that truth will always win out, unaided, not realizing that this is hardly the way truth ever wins out in the academic or any other arena. Truth must be promoted, organized, and fought for as against error. Even if we can hold the faith that truth, unaided by strategy or tactics, will win out in the long run, it is unfortunately an excruciatingly long run in which all too many of us — certainly including Mises — will be dead. Yet, Menger adopted the ruinous strategic view that “there is only one sure method for the final victory of a scientific idea, by letting every contrary proposition run a free and full course.”
Joe Salerno starts with Rothbard’s insight and takes it further in his history of the French Liberal School.
Bastiat’s school didn’t fade away; neither did it lose in honest competition with rival schools of thought. The French liberals made the fatal error of recruiting the French government into their effort to promote economic literacy. The result, of course, is that the French government promoted social democrats and legal positivists. Where the French liberals had been the leading economists in a nation without any official university economics departments, they became outsiders in a statist profession — a profession they had dirtied their hands to create.
- Rothbard’s first insight is that the truth must be fought for.
- His corollary insight is that a school of thought needs institutional support.
- Salerno’s emphasis (one I’m sure Rothbard championed) is that the State will never help advance economic truth, since the truth is greatly to the disadvantage of the political class.
In his tribute today, George Reisman writes, “Mises is important because his teachings are necessary to the preservation of material civilization.” That may sound like hyperbole, but it isn’t. Bad theory can destroy civilization if the bad theory is about what creates or destroys civilization.
I didn’t begin this post as an apologia for the Mises Institute, but apparently that’s where these observations have led me. I consider myself lucky to be able to spend my days doing something I enjoy. And I feel even luckier to spend them doing something I consider important. But I don’t quite know how to describe the growing sense I have that what we’re doing might well be the most important work there is to be done: battling the forces, malicious nor not, of destruction and decivilization.